Suppose the marginal benefit of writing a contract is $70, independent of its length. Find the optimal contract length when the marginal cost of writing a contract of lengthLis:

Instruction:Enter your responses rounded to two decimal places.

a.MC(L) = 40 + 2L.

_____________________

b.MC(L) = 20 + 5L.

_______________________

c. What happens to the optimal contract length when the marginal cost of writing a contract declines?

(Click to select)

It decreases.

It stays the same.

It increases.